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Private Sector Needs Approval for Fiber Optic Projects

The participation of the private sector in developing national fiber optic projects (Palapa Ring) should be approved by the Ministry of Finance. The Palapa Ring Project is one of the government’s ways to increase broadband penetration in Indonesia, targeted to reach 30 percent in 2014.

Muhammad Budi Setiawan, Director General of Resources and Post and Information Tools at the Ministry of Communications and Information Technology, said that one of the Palapa Ring Project’s obstacles is funding, especially non-profiting areas. Therefore, the government expects telecom operators to participate by means of public-private partnership (PPP).

"The problem now is whether the PPP pattern is approved by the Ministry of Finance or not. If it is, the government could quickly complete the Project," Budi Setiawan said on Wednesday.

According to Budi, PT Telekomunikasi Indonesia Tbk (TLKM) is currently the only company developing fiber optic networks in non-economical and minimum network areas owned by PT Indosat Tbk (ISAT). Other operators are not building any network because they must start from scratch, investing a great deal of capital.

Palapa Ring is a national fiber optic construction project encompassing 33 provinces and 440 cities throughout Indonesia. The project includes plotting of 35,280 kilometers submarine cables and 21,807 kilometers mainland cables. Approximately 42,470 km has been completed, covering Sumatra, Java, Kalimantan, Sulawesi, and Bali. The remaining 10,000 km will be constructed in Maluku and Papua.

The government plans to use USO (universal service obligation) funds to complete the project. The USO fund is derived from telecommunications operators levying 1.25 percent of their gross revenues. USO Fund is currently estimated to reach Rp 5 trillion. The use of USO fund for the project must also be approved by the Ministry of Finance.

Jayesh Easwaramony, Vice President of ICT Practice Frost & Sullivan Asia Pacific, said the wireless broadband and related industrial sectors in Indonesia have the potential to generate US$ 9.01 billion. The amount is equal to 1.68 percent of Indonesia’s gross domestic product (GDP) in 2015. This is in accordance with the World Bank’s study on developing countries, showing that an increased broadband penetration of 10 percent will affect the country's GDP by 1.21 percent.

"Indonesia is the third largest wireless market in Asia after China and India with a total of 194.4 million mobile subscribers in 2010," Easwaramony said.

According to Jayesh, Indonesia, in 2010, was second to last in the list of Asia Pacific countries in terms of wireless broadband penetration, with only 2.3 percent of its population reached so far. However, it is estimated to increase by about 23 percent in 2015.